Skimpier Health Plans Could Impose Big Out-Of-Pocket Costs

People are worried about being able to pay for health insurance. So the insurance industry and a group of Democratic senators have proposed offering cheaper, skimpier "copper plans" on the health law's marketplaces that could draw in people who were unhappy with the cost of available plans.

But consumer advocates and others who study the insurance market suggest that there may not be a big demand for these plans and that they could expose people to unacceptably high out-of-pocket costs if they got sick.

"It's a false promise of affordability," says Sabrina Corlette, project director at Georgetown University's Center on Health Insurance Reforms. "If you ever have to use the plan, you won't be able to afford it."

Coverage through the Affordable Care Act is divided into five types of plans that require different levels of cost-sharing. Platinum plans pay 90 percent of medical expenses, on average; gold plans, 80 percent; silver plans, 70 percent; and bronze plans, 60 percent. Tax credits to help pay premiums are available for people with incomes up to 400 percent of the federal poverty level ($46,680 for an individual in the 2015 plans). In addition, a catastrophic plan is available, mainly to people younger than 30; it covers only limited services before the deductible is met and isn't eligible for subsidies.

The aim is to attract people who haven't yet bought coverage on the state marketplaces, as well as young or healthy people who may want a less expensive option.

"Plans do considerable outreach, and they're hearing that affordability is a top priority for consumers," says Karen Ignagni, president and chief executive of AHIP. "This is about access. It's about how do we give people the opportunity to get into the market."

According to a survey conducted for Enroll America, a health insurance advocacy organization, 48 percent of those who didn't try to enroll in the health law's new insurance marketplaces said the No. 1 reason was the fear that they couldn't afford coverage. But many of those people didn't know that financial help was available to help defray the cost of the insurance. Only 1 in 5 of those who didn't sign up for coverage knew that premium subsidies were available for low- and middle-income people, the survey found.

The average monthly premium for all types of plans sold on the federal marketplace last year was $346, according to a report released in June by the Department of Health and Human Services. But that dropped to $82 once premium tax credits were taken into account.

Some industry analysts are skeptical that people will be enticed by another type of high-deductible/low-premium plan. They note that bronze plans weren't particularly popular sellers on the marketplaces.

Only 20 percent of people who bought marketplace plans chose bronze-level plans, according to HHS. Two percent bought catastrophic policies. Silver plans were by far the most popular plan, selected by 65 percent of purchasers.

Rates almost certainly will go up next year. Looking ahead, an analysis of 2015 premium rate proposals in nine states by the consulting firm Avalere Health found that insurers are proposing 8 percent rate hikes for silver plans.

"Premiums are coming through somewhat lower than expected," says Caroline Pearson, a vice president at Avalere Health. "Do we really think there's a premium affordability problem such that we should shift the benefit design toward that?"